French Finance Minister Named in Party Scandal

PARIS— Allegations of corruption with potentially major impact have begun to wash up close to the government of Prime Minister Lionel Jospin and its finance minister, Dominique Strauss-Kahn, French socialism's designated-guarantor of good sense to the international business and investment communities.

An examination by investigating magistrates of a student health-insurance fund's possible function as a source of illegal money to Socialist Party figures has resulted in the cooperative organization's former second-in-command saying that Mr. Strauss-Kahn was paid 603,000 francs ($97,260) in lawyer's fees in the early 1990s for fictitious work, according to coinciding French newspaper reports.

Mr. Strauss-Kahn denied the accusation on Friday, as the health insurance fund's former director-general, Olivier Spithakis, was jailed and placed under official investigation in another aspect of the examination of the fund's finances.

His former chief of staff, Philippe Plantagenest, who accused Mr. Strauss-Kahn, a former legal adviser to the group, was also under official investigation, as was a third man, Francois Bernadini, first secretary of the Socialist Party in the Marseille region. Bernadini has been jailed, and at least five other men placed officially under investigation.

The Paris prosecutor's office granted permission to investigators Thursday to open an inquiry into accusations that Strauss-Kahn used forgery to cover up the alleged fictitious work. At the same time, Mr. Strauss-Kahn's lawyer turned over documents that he said showed the existence of genuine lawyer's services.

If the allegations of pay-for-no-or-little work are followed by Mr. Strauss-Kahn's questioning by the investigators, there would be a substantial destabilizing effect on a government portraying itself as a locus of incorruptibility and competence. Mr. Strauss-Kahn is often described as an emblematic figure for the France of 1999 in that he has been successful in casting himself as the professional manager of the French economy, unfazed by pressures or rhetoric from the Socialist left wing.

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A sense of the potential seriousness of the matter was clear in accounts and commentary published by Liberation, a leftist newspaper that usually defends the Jospin government. It described the circumstances as "enormous trouble" for Mr. Jospin, and likened them in magnitude to the scandal that has brought to trial the wife of Jean Tiberi, the mayor of Paris, accused of receiving payment for an official report on a subject about which she had no demonstrable competence. Ironically, Mr. Strauss-Kahn is often mentioned as a potential mayoral challenger to Mr. Tiberi, a Gaullist.

Although the investigators have declined to discuss the case publicly, the newspaper accounts provided remarkable detail, seemingly reinforcing the credibility of their descriptions.

In a story in the newspaper Le Parisien, Mr. Plantagenest was said to tell investigators that a letter he apparently sent to Mr. Strauss-Kahn on Dec. 13, 1994, undertaking his counsel in the sale of Raspail Participation and Developpement, a holding company of the health-insurance fund Mutuelle Nationale des Etudiants de France (MNEF), was not written on the date indicated.

Rather, Mr. Plantagenest told investigating magistrates two weeks ago that it was written much later and antedated at the insistence of Mr. Spithakis. A second letter, described as signed by Mr. Strauss-Kahn, detailing his activities in the sale, and addressed to Mr. Plantagenest, was never received, Mr. Plantagenest was reported as saying.

Mr. Plantagenest told investigators, according to Liberation, that the first letter was just a piece of paper aiming to justify Mr. Strauss-Kahn's insubstantial services. "With it," the newspaper wrote, "a whole wall of explanations from Dominique Strauss-Kahn crumbles."